Building defects rarely arrive as a simple maintenance issue.
Once a defect is found in common property, the conversation can quickly shift from “what needs to be repaired?” to “who has to pay for it?” That is often where owners corporation members and Committees find themselves in difficult territory.
Some repairs benefit the whole building, while others appear to affect only certain lots, such as balconies, roof areas, façade sections, waterproofing or shared plumbing. In those cases, the owners corporation may need to consider whether lot liability or the benefit principle applies.
Before decisions are made, an owners corporation should consider three key questions:
- Who is responsible for arranging the necessary works?
- Who is liable for the cost of the works?
- How should the works be paid for?
These questions should be considered early, because once fees are raised or funds are used, it may be much harder to revisit how the cost should have been allocated.
The starting point under the Owners Corporations Act 2006
The starting point is that under the Owners Corporations Act 2006, an owners corporation has a duty to repair and maintain common property.
An owners corporation may levy annual fees for general administration, maintenance, repairs, insurance and other recurrent obligations. If annual fees are levied under section 23 of the Act, those fees are generally based on lot liability.
A different issue can arise when the owners corporation needs to levy special fees and charges for extraordinary expenditure.
If special fees and charges are levied under section 24 of the Act, and the fees relate to repairs, maintenance or other works carried out wholly or substantially for the benefit of one or some lots, but not all lots, the fees must be levied on the basis that the lot owner who benefits more pays more.
This is commonly referred to as the benefit principle.
The benefit principle is also reflected in section 49 of the Act, which deals with recovering the cost of repairs, maintenance or other works as a debt where the works are carried out wholly or substantially for the benefit of one or some lots.
The benefit principle is not always simple
On the surface, the benefit principle sounds straightforward: if one lot benefits more from certain works, that lot owner may need to pay more.
In practice, it is rarely that clear.
A defect may affect a balcony, roof area, façade, plumbing line or waterproofing system that appears to benefit some lots more than others. Some owners may argue they should not contribute because they do not directly use the affected area. Others may argue the works still protect the building as a whole.
That is why the owners corporation needs to look beyond personal use. It should consider the Act, the plan of subdivision, the nature of the defect, the affected property, who benefits from the works and how the cost is being raised or recovered.
A Victorian Supreme Court decision
A Victorian Supreme Court decision considered the application of the benefit principle in a balcony repair dispute.
In that case:
- the lot owner owned a penthouse unit in an apartment building
- 34 of the 39 units in the building had balconies
- the applicant’s unit did not have a balcony
- the owners corporation levied fees for balcony repair works on a lot liability basis, even though five units did not have balconies
- the repair works were carried out and paid for using levied funds and money from the owners corporation’s maintenance fund
- the applicant brought proceedings against the owners corporation and disputed that it should have to contribute to the repair works
The Court found in favour of the owners corporation.
A key point from the decision was that the benefit principle applied at the point of levying and collecting money from lot owners, rather than later at the point of payment from the fund.
The implication is important. If an owners corporation has already raised fees on a lot liability basis, or has already paid for works from the maintenance fund, it may lose the opportunity to seek a different contribution from lot owners based on the benefit principle.
What this means for owners corporations
This decision is a reminder that owners corporations should think carefully about repair costs before levies are raised or funds are used.
When a common property defect or repair issue is identified, the Committee should consider early whether the works benefit all lots, or whether one lot or a group of lots may benefit more than others.
The benefit principle will not apply to every defect or repair. Many common property repairs will still be funded according to lot liability. The risk is leaving that question until after the funding decision has already been made.
Clear management support also matters. A Committee does not need its manager to give legal advice, but it should expect guidance on process, records, meeting motions and when specialist advice may be needed.
Practical considerations for Committees
Before raising fees for defect related repairs, a Committee should understand what is being repaired and how the cost will be allocated.
This means considering whether the affected area is common property, lot property or a shared service, whether the works benefit all lots or only some lots, and which part of the Act applies.
If the position is unclear, legal advice may be needed before applying the benefit principle. The Committee should also record its reasoning clearly, so owners can understand how the decision was reached.
When defect decisions become difficult to manage
Building defect issues are difficult enough without unclear communication, delayed action or uncertainty about the process.
A capable owners corporation manager should help the Committee stay organised, obtain the right advice, prepare clear meeting motions and keep lot owners informed. They do not replace legal or technical experts, but they do play an important role in keeping the process moving.
If defect repairs, levy decisions or owner communication are becoming harder than they need to be, it may be worth reviewing whether the current management arrangement is still supporting the building properly.
For Committees already considering a change, Change Body Corporate can help them understand the next steps and what to look for in a more suitable owners corporation manager.
